Insights

Does your business have a strong ESG (Environmental, Social, Governance) Proposition?

Written by Lisa Bratkovich | Aug 22, 2023 8:40:02 AM

Does your business have a strong ESG (Environmental, Social, Governance) Proposition?
 
If you do, your customers will pay more, your regulators will be more lenient, and your employees will be more productive – all resulting in greater value and profits -- for your company.
 
E – Environmental Criteria: The energy, waste and resources you use, and the consequences it has on the world.
 
S – Social Criteria: Your reputation and relationships in the community.
 
G – Governance Criteria: Your internal system of governing practices, making effective decisions, complying with the law, and meeting the needs of external stakeholders.
 
ESG links to cash flow in five (5) important ways:
 
#1 – Facilitating Top-line Growth
Choose: Gaining more B2B and B2C clients by having more sustainable products over losing customers through poor sustainability practices
 
Financial Benefit: Customers are willing to pay up to 5% more (across industries) for businesses who offer green products.
 
#2 – Reducing Costs
Choose: Lower energy consumption and water intake reduction over generating unnecessary waste (cue higher costs) and higher packaging costs.
 
Financial Benefit: Reducing costs can surprisingly affect your operating profits by as much as 60%.
 
#3 – Minimizing Regulatory & Legal Interventions
Choose: Greater strategic freedom through deregulation and earning subsidies and government support over suffering advertising restrictions, fines and penalties.
 
Financial Benefit: Currently, 1/3rd of companies are at risk for state intervention. Moreover, this could negatively impact your profits from 25-60% (varies by industry).
 
#4 – Increasing Employee Productivity
Choose: Employee satisfaction (which has a positive correlation with shareholder returns and generating higher stock returns) over “social stigma” and weak purpose.
 
Financial Benefit: Companies that made Fortune’s “100 Best Companies to Work For” list generated 2.3-3.8% higher stock returns per year than their peers.
 
#5 – Optimizing Investment and Capital Expenditures
Choose: Long-term thinking and sustainability over falling behind competitors that do have a strong ESG proposition.
 
Financial Benefit: Providing solutions for sustainability may offer new opportunities for you to enhance investment returns.
 
Do you have a strong ESG proposition?

 

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